Harmonisation involves limiting accounting practice variations to increase compatibility, while standardisation means all countries apply the same IFRS rules. Australia has harmonised its standards with IFRS and is working towards full standardization, though it has made some additions and variations. The US is still negotiating a pathway to harmonisation through a convergence project. China has a strong commitment to IFRS harmonisation since 2006, even more so than the US. Countries may modify local IFRS to suit local conditions, like Australia modifying mining and exploration standards, but the more a country modifies the further it moves from full standardization.

1. Harmonisation vs
standardisation
1 Created by Dr G. L. Ilott, CQUniversity Australia

2. Definitions
What is harmonisation?
A process of increasing the compatibility of accounting practices by
limiting the available options for variations.
What is standardisation?
For accounting, it means that every country standardising on IFRS
essentially applies the same accounting rules.
2 Created by Dr G. L. Ilott, CQUniversity Australia

3. Where is Australia at the moment?
Australia has harmonised and working towards standardisation.
A review of Australia's accounting standards reveals a number of
additions and variations to suit the local economy.
3 Created by Dr G. L. Ilott, CQUniversity Australia

4. Where is the USA at the moment?
The USA is still negotiating a pathway to
harmonisation. It is called a convergence
project, where common ground is found
between IFRS and the USA GAAP.
4 Created by Dr G. L. Ilott, CQUniversity Australia

5. Where is China at the moment?
Interestingly, China (and Russia) has a greater commitment towards
IFRS than the USA. It is already well down the harmonisation route,
having committed since 2006.
5 Created by Dr G. L. Ilott, CQUniversity Australia

6. Why would a country modify its local IFRS?
The previous presentation already pointed to many reasons why
countries might not be convinced of a "one size fits all" approach.
Even after harmonising on IFRS, countries like Australia retain
jurisdiction to modify standards to suit local conditions.
For example, Australia is strong in the extractive industries. Why
shouldn't Australia seek to modify related standards? How would
standards developed in Europe reflect the Australian experience in
accounting for mining and exploration?
6 Created by Dr G. L. Ilott, CQUniversity Australia

7. What are the costs of modifying local IFRS?
The more a country modifies, the further it gets from standardisation.
Standardisation offers the fullest benefits of tapping into global trade and
capital flows.
However, always remember the cost of standardising: what is that you
have to give up to gain the benefits of standardising?
Also, why should a country bear the costs of standardising, when the
benefits are not materialising due to so few countries actually being on
standardised IFRS?
7 Created by Dr G. L. Ilott, CQUniversity Australia

8. A final word
For you, the new professional accountant, there are huge benefits to
knowing your IFRS.
Financial accounting is now beyond borders. Your knowledge and skills
are immediately international skills.
Enjoy seeing the worlds (and doing interesting stuff while you do it!).
8 Created by Dr G. L. Ilott, CQUniversity Australia